ICC raises concerns at WTO about the misuse of customs valuation databases

ICC was welcomed as the only non-governmental actor and the representative of the trade community at the World Trade Organization’s (WTO) informal workshop on valuation databases and reference pricing.

The forum in Geneva was the occasion to share experiences and perspectives on the use of customs valuation databases.

The long-anticipated event was the result of several ICC appeals to the WTO and World Customs Organization (WCO), over the past two years, to address the misapplication of valuation databases to set reference and minimum prices. The closed workshop was attended by approximately 100 participants comprising WTO delegates, representatives of the WCO and Customs agencies.

Upon WTO request ICC provided business views at the workshop which offered valuable insights from government experts from Africa, Asia, Europe, North and South America on the use of customs valuation databases. Mark Neville, a member of the ICC Commission on Customs and Trade Facilitation, raised ICC’s concerns on the proliferating misuse of valuation databases. While acknowledging that these databases can provide a useful tool for risk assessment, Mr Neville recounted traders’ experience and provided a number of country examples in which WTO members were using valuation databases to set reference and minimum prices – a practice prohibited by Article 7 of the WTO Customs Valuation Agreement. “These practices are in violation of the positive basis of the price actually paid or payable which is the core principle of transaction value under the WTO Customs Valuation Agreement,” said Mr Neville.

Several participants stressed that customs valuation databases were a means to identify undervaluation of imported goods but acknowledged that the potential misuse of such databases was a sensitive issue. The event highlighted that detecting customs value fraud was of vital importance particularly in developing countries, where customs revenue collection is a main source of national income. At the same time these countries often have a large informal trade sector and the lack of a formal financial trail – such as authentic commercial invoices, bills of lading or letters of credit – constitutes a daunting challenge in determining a valid customs declaration. ICC fully recognized the special dynamics of developing countries and called for the use of a ‘green lane’ system for formal trade and trusted traders in order not to impede broader cross-border trade flows and economic growth. Mr Neville stated: “We feel very strongly that legitimate traders and economic operators have as much at stake as customs authorities in ensuring that imported goods are properly valued and collaboration with the private sector should be promoted.”

The half day workshop saw a general consensus that customs valuation databases alone cannot justify striking down declared values but could play a part as a risk assessment tool for customs valuation compliance. Particularly in developing countries with large informal trade sectors The WCO said that – in line with WTO rules (Decision 6.1 of the Committee on Customs Valuation) – countries should seek an explanation from the trader, in the case of reasonable doubt, on the declared customs value. The WCO and ICC promoted the expanded use of post-clearance audits as a more effective long term solution in managing customs valuation compliance and representatives of several countries also encouraged the use of advance rulings. In this context the importance of capacity building was emphasised.

To address the abusive use of valuation databases, ICC recommended following set guidelines, providing training on and registering of database usage, database usage, promoting greater clarity and transparency, and increasing collaboration between customs agencies and the private sector.

The workshop was a first occasion for the WTO to discuss the misuse of valuation databases and following the event ICC will continue to actively engage with the WTO and the WCO as the issue evolves.